Review of the FATF Evaluation of the USA’s AML Regulatory Framework

Overview

The United States has undergone significant scrutiny and evaluation by the Financial Action Task Force (FATF) concerning its anti-money laundering (AML) and counter-terrorist financing (CTF) measures. In the 7th Enhanced Follow-Up Report, dated March 2024, the FATF analyzes the United States’ progress since its Mutual Evaluation Report (MER) in 2016, focusing on technical compliance re-ratings and addressing deficiencies.

Progress and Technical Compliance

After the 2016 MER, the U.S. was placed in enhanced follow-up due to identified deficiencies. The latest report demonstrates progress, particularly in addressing deficiencies related to Recommendation 24, which deals with transparency and beneficial ownership of legal persons. The U.S. has moved from a non-compliant (NC) rating in 2016 to largely compliant (LC) in 2024, reflecting improvements in legislation and regulation.

Significant advancements include enacting the Corporate Transparency Act (CTA) and finalizing the Beneficial Ownership Information (BOI) Reporting Rule. These measures require certain U.S. and foreign entities to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), enhancing the transparency of legal entities.

Key Findings

1. Criterion 24.1 to 24.3: The U.S. has addressed the transparency of legal entity structures and the assessment of money laundering/terrorist financing (ML/TF) risks associated with legal persons, aligning with FATF recommendations.
2. Corporate Transparency Act (CTA): The CTA mandates disclosure of beneficial ownership to combat the misuse of legal entities for illicit purposes, marking a substantial regulatory enhancement.
3. Criterion 24.4 to 24.6: The U.S. has improved mechanisms for maintaining and sharing beneficial ownership information, although some gaps remain, particularly in ensuring the accuracy and currency of this data.
4. Financial Institution Compliance: Under the CTA and Customer Due Diligence (CDD) Rule, financial institutions play a critical role in collecting and verifying beneficial ownership information.
5. Criterion 24.7 to 24.9: The introduction of stricter rules around the maintenance and updating of beneficial ownership information signifies a commitment to keeping this data timely and accurate.
6. Criterion 24.10 to 24.14: Enhanced legal and regulatory frameworks facilitate better international cooperation and access to beneficial ownership information for law enforcement.

Conclusion

The U.S. has made commendable progress in fortifying its AML/CTF framework, particularly regarding the transparency and management of beneficial ownership information. The FATF’s re-rating of the U.S. to “largely compliant” for Recommendation 24 reflects these strides. However, the report indicates that there remain areas for improvement, especially in maintaining up-to-date and accurate beneficial ownership data and ensuring broader coverage of all entities under the CTA and BOI Reporting Rule. The ongoing efforts by the U.S. to address these issues and refine its AML/CTF measures are crucial for enhancing the integrity of its financial system and combating illicit financial activities.

For more information visit the FATF website or download the full report here: https://www.fatf-gafi.org/content/dam/fatf-gafi/fur/USA-FUR-2024.pdf.coredownload.inline.pdf